Dubai emirate, saw annual inflation subsiding to a six month low of 0.3 % in October
UAE inflation hit an 18 month high of 1.9 percent in October, while prices edged up slightly in fellow Gulf Arab state Bahrain, data showed on Sunday, indicating economic recovery is slowly taking hold.
Consumer prices in the UAE, the world's third largest oil exporter, had picked up in September to reach 1.2 percent on the year after staying at 0.9 percent for four straight months.
On the month, price growth slowed to 0.6 percent in October, from 0.9 percent the previous month, as a surge in housing costs failed to offset a sharp deceleration in food price growth, data from the National Bureau of Statistics showed.
Giyas Gokkent, chief economist at the National Bank of Abu Dhabi said: "I am not concerned (about higher inflation). I would see it more as a normalisation of things."
UAE inflation hit a nine year low of 1.6 percent last year, plunging from a record high of 12.3 percent in 2008, as the global crisis pierced a local real-estate bubble, pushing the second largest Arab economy into its first recession since 1993.
In 2010, price growth remained weak due to the impact of Dubai's debt woes which squeezed the OPEC member's banking sector while the property market remained flush with new units.
Housing prices, which account for over 39 percent of UAE living costs, jumped 1.2 percent month on month, after a 0.2 percent rise in September, which analysts attributed to a likely increase in below-market rents.
Volatile food price growth cooled significantly, running at 0.4 percent in October, well below a Ramadan impacted 2.7 percent surge in the previous month.
Transport costs, the third largest basket item, dived into negative territory in the latest month, posting a 0.1 percent fall after September's 1.6 percent increase.
The Dubai emirate, which accounts for around 80 percent of the UAE's non-oil trade, saw annual inflation subsiding to a six month low of 0.3 percent in October.
Abu Dhabi, which accounts for 10 percent of the world's oil reserves and more than 60 percent of the UAE economy, has yet to release detailed October data after inflation climbed to at least a 21 month high of 3.8 percent in September.
In September, analysts polled by Reuters expected average UAE inflation of 1.5 percent in 2010.
In Bahrain, inflation inched up to 2.1 percent on an annual basis in October, a three month high, but price growth slowed to a mere 0.1 percent on the month, separate data showed on Sunday.
John Sfakianakis, chief economist at Riyadh based Banque Saudi Fransi said: "Headline inflation increases in Bahrain and the UAE, although slightly higher than before, are extremely benign and will remain so for the next year or so."
He said: "The overall macroeconomic picture is one of recovery but not a spike in economic activity in Bahrain and the UAE."
Analysts expected inflation in the small, non-OPEC crude producer to reach 3.0 percent this year.(Reuters)